First-home buyers able to enter the property market up to 13 months earlier

Domain’s annual First Home Buyers report has revealed the time taken for Aussies aged 25-34 to break into the property market with a 20% deposit for an entry-priced property has fallen by 13 months.

This comes as Domain’s 2022 report revealed young couples were taking an extra 11 months to reach the 20% deposit milestone off the back of booming property prices.

Domain Chief of Research and Economics Dr Nicola Powell noted nationally for a young couple, it’s now become six months quicker to purchase an entry-priced house and two-months quicker for an entry-priced unit compared to a year ago.

“A time machine has been offered to first-home buyers across Australia, as falling property prices in certain cities, higher interest rates accrued on savings and wage growth have aligned to reduce the time to save for an entry-priced property deposit,” Dr Powell said. 

Across the nation, Sydney recorded the largest decline in the amount of time required to amass a 20% deposit, falling 13 months for houses and six months for units.

This decline aside, Australia’s unofficial capital remains the city with the longest period of time required to save for an entry-priced house deposit at nearly 7 years. 

Darwin holds the crown as the best city for first-home buyers looking to enter the housing market, with the fastest saving time of 3 years and 6 months. 

Source: Domain. Year = y, Month = m.

Dr Powell said previously rock-bottom interest rates greatly benefited mortgage holders, making it cheaper to borrow and repay a home loan.

“However it was a key driver of property price growth, making time to save a deposit longer,” she said.

“This narrative has flipped since the Reserve Bank of Australia embarked on one of the most aggressive rate hiking cycles in history, escalating the cash rate to over a decade high.

“Now in 2023, first-home buyers are facing less competition and softer prices, reshaping the affordability conversation.” 

Property type, mortgage serviceability weigh heavily on first-home buyer sentiment 

Domain noted the type of property chosen by first-home buyers can significantly impact the point where home ownership can be achieved, with units typically requiring a shorter time period to save than houses. 

Across combined capitals, Domain revealed purchasing an entry-priced unit could result in getting onto the property ladder a year and a half earlier than saving for an entry-priced house. 

Perth continues its reign as the capital city with the shortest time frame required to save a 20% deposit for an entry-priced unit, taking young couples 2 years and 3 months. 

At the opposite end, Sydney once more remains the capital where it takes the longest amount of time to save for a 20% deposit, at 4 years and 7 months - a year longer than its closest capital counterparts in Melbourne and Canberra. 

Despite the decline in the time taken for young Aussie couples to amass 20% deposits, ABS figures to January 2023 detailed first-home buyer loans fell to a five-year low, down 8.1%.

ABS Head of Finance and Wealth Statistics Mish Tan detailed anecdotal feedback from lenders suggested reduced borrowing capacity due to rising interest rates was dampening demand for new housing loans. 

To break into the market sooner, Dr Powell said it helps if a first-home buyer is flexible on the type of property and location they want, with neighbouring suburbs or units in your ideal area potentially offering greater value. 

“The decentralisation of our workforce has supercharged affordability for some with remote working bringing increased flexibility and greater housing choice,” she said. 

“When navigating the first-home buyer’s market, considering property type and location, or even becoming a rentvestor can all be worthwhile. 

“Government incentives can be advantageous in shaving off years to an entry-priced deposit such as the federal First Home Guarantee program which allows low-deposit purchases without mortgage insurance (LMI).” 

See more: A guide to the First Home Guarantee

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